About One Third of Member Company Suppliers have CO2 Reduction Targets; Total CO2 likely to Rise at this Pace, Report Finds; PepsiCo Reduces Energy per Unit by 16%

By The Green Supply Chain Editorial Staff

The Carbon Disclosure Project (CDP), a London-based group that focused on driving detailed reporting of carbon emissions by companies and strategies for CO2 mitigation, has just released its 2011 Supply Chain report, based on the survey results of its 57 members companies and many of their suppliers. The basic news: these climate change "leaders" are making progress in reducing the CO2 emissions of their global supply chains and trading partners, but the progress is not fast enough and must be accelerated.

CDC was started in 2000 and has some 300 regular members, launching the supply chain group just last year. The driver of that effort, the report says, the fact that " Over 50% of an average corporation’s carbon emissions are typically from the supply chain rather than within its own four walls. Managing supply chain emissions is therefore critical if we are going to address climate change effectively."

The Green Supply
Chain Says:

The member survey showed that members give an average weight of 17% to carbon management criteria in the selection of their suppliers, up from 11% last year.

The 57 SCM group members include a mix of industries, with the heaviest concentration in consumer packaged goods (e.g., Kraft, ConAgra, Danone), high tech e.g., (Dell, HP, Philips), financial (e.g, Bank of America, Barclays), life sciences (e.g., Biogen, Johnson & Johnson, Baxter), with a smaller representation from other industries with such companies as WalMart, Ford, Johnson Controls, and L'Oreal.

25 of the 57 members are US-based; 21 are from Europe.There is a noticeable lack of what might be called "industrial companies" (with a couple of exceptions), and just one firm from China - Chicony Power.

The 2011 report is based on data from 55 of the 57 members companies, which in total asked 1853 of their suppliers to also respond to a CDP survey; 1000 (54%) responded to the request.

The report as usual spends a lot of time praising the CDC itself and its members, but comes away with three primary conclusions from the survey data:

1. The plans for carbon reduction by members' suppliers isn't enough to meet what CDC says is necessary to impact global warming: Only one third of responding suppliers have a target for carbon reduction and the targets they have in place are not sufficient. "Should this status continue, this would mean global emissions by 2015 will increase by 6% instead of the necessary 20% reduction," the report says.

The average suppplier CO2 reduction target is 3.5% per year - slightly below the 3.9% reduction target The Intergovernmental Panel on Climate Change says is needed to reduce CO2 emission by 80% by 2050 and avoid what it says will be climate disaster by 2100.

Another fifth of the companies are developing a target, but even if these targets are implemented next year, still only half of the companies will have a target in place. If this situation persists, with only a portion of global businesses setting a target, global carbon emissions controlled by business will actually increase by 12% by 2020, the report says.

2. Still, progress is being made: Compared to last year, companies have improved in assembling the building blocks for "dramatic" change, including improved reporting, increased board level responsibility and "greater realization that carbon management presents a wider cost and revenue opportunity rather than being a pure risk mitigation activity."

For example, the reporting capabilities of companies have increased. The survey found that around 80% of suppliers report on scope 1 and 2 emissions, which is a significant improvement over the 60% rate found last year. (of course, this is only for suppliers responding to the survey, so the figures for all suppliers is probably much less).

"This is a very important and significant increase," the report says, because it is a building block for setting meaningful targets against a baseline that can then be tracked and monitored."

3. CDP members are increasingly using their influence and power to drive change: They do this by
deploying "differentiated levers" to engage with their suppliers, including redesigning products,
directly reducing demand for carbon intensive purchases, working collaboratively with suppliers to cut
emissions, and making effective carbon management a supplier selection criterion.

The report notes, for example, that in 2010 the supplier response to CDP grew by 40% to a total of 1,000 participating companies. In the emerging markets (e.g. India & China), the response rate for the CDP Supply Chain questionnaire was twice as high as for the Investor CDP questionnaire, another CDP annual survey.

The report says that data from the supply chain group member companies also shows significant climate change progress.

For example as shown in the graphic below, the percent of the supply chain group members whch are now reporting emissions figures or estimates from the extended supply chains more than doubled over the past year, from 20% to 45%.

Source: Carbon Disclosure Project

Also, the member survey showed that members give an
average weight of 17% to carbon
management criteria in the selection of
their suppliers, up from 11% last year, as shown in the graphic below.

Within five years, members expect these
criteria to weigh 29% in their supplier
selection - though frankly we are dubious about the reality of both sets of numbers.

Source: Carbon Disclosure Project

Lastly, the survey showed that member companies have substantially increased the training and incentives they give to procurement staff, with the percent offering formal traning in green procuement strategies rising from 26 to 41% this year, and the percent offering some type of incentives in this regard mroe than doubling from 11% in 2009 to 25% in 2010.

Source: Carbon Disclosure Project

The report also notes the benefits PepsiCo has achieved in its CO2 reduction efforts, The company own
operations have seen a 16%
reduction in per-unit energy use in
beverage plants since they have begun
implementing more than $60 million in
energy savings opportunities.

The company has now also started to share this know-how with its supply chain, providing strategic suppliers with access
to a proprietary energy assessment
tool, which has been used by PepsiCo
to improve the energy efficiency of its
own operations. This tool highlights
a supplier’s top 10 to 15 energy
conservation opportunities.

“Suppliers are much
more willing to overcome any scepticism
on how measuring their GHG emissions
and developing a reduction strategy
will benefit their businesses if they see
firsthand how other companies reaped
tangible financial benefits” says Rob
Meyers, Group Manager, Environmental
Sustainability, at PepsiCo.

What is your reaction to the CDP supply chain report? How different are the member companies versus the average company, do you think? Are you also dubious that companies are really weighting carbon emissions at 17% in supplier selection today? Let us know your thoughts at the Feedback button below.